Insights is a weekly series featuring entertainment industry veteran David Bloom. It represents an experiment of sorts in digital-age journalism and audience engagement with a focus on the intersection of entertainment and technology, an area that David has written about and thought about and been part of in various career incarnations for much of the past 25 years. David welcomes your thoughts, perspectives, calumnies, and kudos at firstname.lastname@example.org, or on Twitter @DavidBloom.
Amid the many recent publisher pivots to video, one company notably went the other direction: Spotify, which last summer dropped plans to add original video programming to its streaming-music service. Now Spotify is again taking an unconventional route, going public without actually doing a traditional IPO.
The approach has Wall Street and Silicon Valley watching closely, but we should all be listening in. Spotify’s decision is only the latest, potentially biggest illustration of the hot market for online audio, music and voice-activated services. It also may transform how some companies go public.
Spotify said last summer that it has 60 million paying customers, roughly double that of No. 2 Apple Music, among its 140 million users. Along the way, the Sweden-based company has transformed the music business with its streaming model, freemium pricing structure and taste-making playlists such as Rap Caviar.
— Rich Greenfield (@RichBTIG) January 5, 2018
At the end of last month, the company filed public-offering documents confidentially with the U.S. Securities & Exchange Commission, indicating it plans to directly list its shares on the New York Stock Exchange.
The public offering should generate billions (Spotify’s current valuation is around $19 billion), and because it doesn’t involve many of the accoutrements of a traditional IPO (no float, no road show, no “lock-up” period), Spotify won’t face all the stiff fees typically exacted by investment banks. What’s more is the company has said its 2017 revenues were expected to pass $4.9 billion, up 40% from the year before.
If the company can generate serious cash without serious expenses, expect more such direct offerings, which will hurt Wall Street bankers who thrive on those fat fees, while giving tech firms another way to cash in.
The offering will undoubtedly stir a lot of interest from retail investors also, particularly among Spotify’s many loyal subscribers. But amid what I expect will be a buyer frenzy, it’s important to note that, despite its prime position and vast user base, Spotify is still losing money (though it is cash-flow positive). We won’t know how big those losses are until the offering documents are made public.
As well, Spotify was just slapped with a $1.6 billion lawsuit by Wixen Music Publishing, which represents musicians such as Stevie Nicks, the Doors, and Tom Petty. The suit claims damages related to licensing and copyright infringement, and will be another potential drag on Spotify’s future bottom line.
Meanwhile, Google is trying, yet again, to come up with its own subscription-music service, internally called Remix and now apparently slated for a March debut if deals can be cemented with holdout labels. Remix is being spearheaded by Lyor Cohen, one of the most respected executives in music, whom Google hired to get those labels to buy in despite their misgivings over Google’s rights payments..
More generally, Remix has only deepened confusion over Google’s music strategy. It has tried and failed to launch music-subscription services twice before. As it is, the company already has the Google Play Store, Google Play Music service, YouTube Music, and YouTube Red, plus vast amounts of music-related video on YouTube itself. Perhaps they should just call Remix something like MixedUp.
Google also has a piece of Vevo, the joint venture between YouTube and the Big Three record labels. The music-video site had a banner 2017, ironically in part because of how badly YouTube has mishandled advertisers on its main service.
Many brands fled to Vevo, where they at least reliably knew what content was being run next to their ads. Vevo’s deal is up for renewal, so watch what happens there in the next few months as labels continue to vacillate between love and hate toward audio-streaming and music-video services.
Next week’s Consumer Electronics Show will, of course, be absolutely overrun by voice-activated devices powered by either Amazon Alexa or Google Home digital assistants. Such devices were everywhere at Christmas, though Amazon appears to have a strong early lead with consumers, enough that Google sharply discounted its just-released devices (the low-end Mini went from $49 to $29, a 41-percent cut) to grab market share.
One recent study found that nearly three-quarters of Americans are ready to embrace such voice-activated devices, which can stream music, answer questions, book appointments and control a home’s security, lighting and heating and cooling. Of families with smart-home technologies, nearly 60 percent want to use voice activation to control their music and smart TVs, the survey found.
Roku is also jumping in, announcing this week that it will launch its own voice-assistant platform and wireless speaker, an attempt to compete in audio even as it remains the No. 1 choice for streaming video. The Roku Entertainment Assistant will be licensed to makers of TVs and other electronics so they can build in voice control.
Creators, meanwhile, have sensed a new opportunity with the digital devices. The BBC recently debuted The Inspection Chamber, an experimental audio drama featuring the voices of an unreliable female robot named Dave and two scientists (who may be aliens) trying to identify a new life form (i.e., the listener) by asking it a series of questions. The interactive drama is created for the Amazon Echo and Google Home.
Apple is, or should be, a big player in all this. It has the second-biggest subscription service, and is the go-to source for millions of podcast episodes (indeed, the entire genre owes its name to the iPod). The company even sells highly regarded audio-editing software, the free GarageBand, and powerful yet affordable (by the pricey standards of digital audio workshop programs) Logic Pro X.
Sometime this year, probably, Apple will finally release its Siri-powered high-end smart speaker, the HomePod. I say probably, because Apple has been noodling around with the device for five years. Despite officially announcing a product last summer, the company missed a huge opportunity when it couldn’t get the HomePod in stores by Christmas.
Separately, in a ridiculously recursive and meta piece of news this week, Apple acquired rights to a second TV series from Reese Witherspoon’s production company – she’s already producing and starring with Jennifer Aniston in a dramedy set in a morning news show.
Are You Sleeping will feature Oscar winner Octavia Spencer and is based on Kathleen Barber’s novel about the implications of our obsession with true-crime podcasts such as Serial, which sat atop iTunes podcast rankings for weeks when it debuted in 2014 and later won a Peabody Award. Among those involved in the TV project is Serial creator Sarah Koenig, as a consultant.
We still don’t know what Apple will do with Are You Sleeping or any of its other big-dollar/big-name video projects; the company has yet to detail how they will be distributed.
But it’s somehow fitting in this moment that the company that created the podcast genre is doing a video show about audio podcasts’ impact on culture as part of its push beyond podcasts and music into video.
I don’t know how it will all turn out, but I’ll be listening closely.